EU proposes new duties on Chinese, Vietnamese shoes

European Union Trade Commissioner Peter Mandelson proposed duties on leather shoes from China and Vietnam, setting up a showdown within the EU over how to fight the surge in Asian imports.

Mandelson called for five-year duties to replace temporary ones imposed in March, seeking to prevent Chinese and Vietnamese exporters from selling shoes below cost in Europe and taking business away from European shoemakers.

EU governments are split over how to close the widening trade gap with China, with Sweden leading a pack of free-trade countries opposed to shoe tariffs and southern European countries clamoring for protection.Our job is to tackle unfair competition where it exists, Mandelsons spokesman, Peter Power, told a Brussels news conference on Wednesday. We found it in these two cases.The EUs trade deficit with China reached a record 100 billion euros ($128 billion) in 2005. Chinas sales of 72 billion euros in the first five months of 2006 made it the No. 2 exporter to Europe, just under the U.S.s 74 billion euros.China supplied half of the 2.5 billion pairs of shoes sold in Europe last year, triggering calls for protection by the EUs 8,000 leather-shoe manufacturers, mainly small businesses concentrated in southern Europe.Four-fifths of the EUs leather shoes come from Italy, Portugal and Spain. Some of the shoemakers employ fewer than 10 people.

Shoe Imports

The five-year duties of 16.5% on Chinese and 10% on Vietnamese leather shoes require approval within a month by a majority of the EUs 25 countries. A similar proposal was rejected earlier this month by a group led by Sweden. The EUs temporary tariffs end on Oct. 6.

EU imports of Chinese leather shoes climbed more than fourfold between 2001 and the 12 months through March 2005, raising Chinas share of the European market to 9% from 2.2%, according to the European Commission, the EUs executive agency. Vietnams shipments almost doubled over the same period, boosting the countrys share of the EU market to 14% from 7%.

Todays proposal is the commissions best effort to reconcile different economic interests at stake in Europe, the commission said in a statement.

Mandelson last month called for import quotas as an alternative to tariffs a proposal that was rebuffed by governments including Sweden, which deemed it too harsh, and Italy, which said it didnt go far enough.

Temporary Duties

In March, the EU started phasing in duties up to a maximum 19.4% over five months on Chinese leather shoes and 16.8% on shipments from Vietnam. Both countries already face 7.5% customs duties.

The provisional duties fueled tensions China and followed European curbs on Chinese clothing and complaints that China is ignoring European copyrights and trademarks. China has said the EU lacks proof to back up its claims and is being protectionist. Bloomberg

European shoe retailers representing companies such as Adidas AG, Puma AG and C&J Clark have argued that the trade penalties will cost consumers as much as 150 million euros in higher footwear prices.

Under EU rules, the commission can apply provisional anti-dumping duties for six months and the blocs national governments can turn those measures into definitive five-year duties at the same or different rates.